Recommended Risk Focus for CEOs

With the last few posts on senior management’s role in fraud symptoms, this week I am covering a few interesting posts on CEOs. The CEO has the most critical role for growth of the organization and its governance. Hence, their knowledge of the organization, understanding of business risks and implementing the right strategies goes a long way in building the organization.

The first post “10 Key Challenges for CEOs in 2011” describes some of the risks facing the CEOs in 2011. These need to understood and addressed for long-term growth.

The second post is from McKinsey Quarterly defining the tasks which outgoing CEO’s should do in their last 100 days at office. The general tendency is to ignore the critical issues and wait for the incoming CEO to address them. This attitude influences the organizations negatively and creates a few challenges for the incoming CEO.

Click on the headings to read the full posts.

1.    10 Key Challenges for CEOs in 2011 (via Prnewswire)

“Leading a company now demands that the chief executive officer take on the mantle of Chief Diplomat, Chief Talent Officer, and Chief Image Manager, in addition to his or her more traditional responsibilities,” says Stephen A. Miles, Vice Chairman of Heidrick & Struggles and head of the firm’s Leadership Advisory Services.

“CEOs will encounter a wealth of new challenges in 2011, further complicating a role that has become more highly scrutinized over the past two years than ever before. The impact of the financial crisis combined with the new requirements for conducting business on a global scale have transformed the office of CEO. Today’s challenges require someone who can demonstrate a much broader and more strategic perspective than in the past.”

10 Key Challenges for 2011

Mr. Miles sees ten major challenges for CEOs in 2011:

1. Moving from “business case” to “social business case”

“As companies weigh decisions such as entering a new market or embarking on a multi-jurisdictional acquisition, the ‘business case’ must now be viewed through a new lens: how will this business decision impact the country/region/state/province they are going into? It is no longer enough for companies to simply make a good business case or meet the ‘legal requirements’; they must make the case to the local stakeholders that this move will benefit the target community, who may have concerns about, for instance, the environmental impact. On the flip side, the transformation of developing local economies due to a major corporate presence can then affect the original business case: new unionization and increasing wealth may impact the decision as to whether to grow operations in the area or call into question whether the original business case was a sound one.”

2. Stepping into the role of “ambassador”

“Related to the development above, we are seeing that the CEO must actively engage with politicians and regulators around the world. The CEO must be conversant on policy – be it financial regulation or healthcare reform – that affects his or her company and industry. Policy makers or regulators do not want to speak with delegates, but to the CEO. Given this, the CEO must act as diplomat and build these relationships him- or herself. Only unusually qualified delegates – such as a former top politician who still carries much influence – can effectively step into this role and supplement the CEO

2.     Making the most of the CEO’s last 100 days (via McKinsey Quarterly)

In most cases, incumbent CEOs know when they are likely to leave, and there is usually some time—three months to a year—between the announcement of their departure and the new CEO’s start date. Many departing CEOs view this as a time to step back and avoid making major decisions or stepping on the toes of their successors. While this instinct is understandable, it reduces the likelihood of leaving the new CEO with several important advantages: a clear strategy, plenty of operating momentum, a strong management team, and a clean slate, including the firm resolution of any major outstanding operational or people challenge.

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Would I undertake any strategic or major organizational shifts if I had three more years ahead of me?

An incumbent CEO is likely to be knowledgeable about the strengths and weaknesses of the organization’s current strategy and operations, as well as any changes that are warranted. If the incumbent doesn’t act, a year or more could elapse before the new CEO is ready to do so. And in most industries today, that kind of delay can be costly. For example, a few years ago the CEO of a major high-tech firm retired without establishing clear strategic priorities for the next few years. This casual handoff, combined with the rapid pace of change in the industry and the new CEO’s failure to get up to speed quickly, proved dangerous. Just two years into the new CEO’s tenure, the company was lagging so far behind competitors it had to be restructured.

By contrast, the outgoing CEO of a major food and beverage company continued to push a hostile takeover—the company’s largest acquisition ever—until his last day. His successor was able to complete the deal quickly and gained a strong competitive advantage thanks to the outgoing CEO’s persistence.

Hope you enjoyed the posts. In your view, what risks should the CEOs address? Share your opinion here.

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